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September 16, 2013

Young Millionaires More Optimistic Than Boomers

92% of Gen X, Y milionaires work with an advisor, Fidelity says

Anne Hathaway, Gen Y millionaire. (Photo: AP)

The next generation of millionaires are working hard for their fortunes and are generally optimistic, Fidelity found in its sixth Millionaire Outlook, released Monday.

What's more, 92% of them work with a financial advisor, even if it's just for validation of their investment choices.

Young millionaires are aware that much of their wealth is the result of an inheritance, but the survey found Gen X and Y millionaires are actively participating in growing it even more. Young investors averaged 30 trades per month, the survey found, and 73% said they’ve become more involved in the last five years.

“Gen X/Y millionaires are taking a dramatically different approach to their wealth than the older generations, signaling a new era of wealthy investors,” Bob Oros, executive vice president of Fidelity Institutional Wealth Services, said in a statement. “These next-generation millionaires, who have already surpassed their older counterparts in total assets, are likely to drive significant change among the investors who want to emulate them, the advisors who serve them and the financial services industry that supports them.”

Fidelity asked respondents to rate their financial outlook on a scale where 100 is the most favorable and -100 is the least favorable. Gen X and Y respondents put their outlook at 51, 58 points above boomers. Fidelity noted this was the highest level since it began conducting the survey in 2006.

In addition to having a more positive outlook than boomers, the survey found 92% of younger millionaires work with a financial advisor, compared with 68% of boomers. Even among respondents who said they make their own investment decisions, 61% work with at least one advisor for validation.

Among the services that younger millionaires are looking for from their advisors are estate planning, charitable giving and retirement planning. Boomers and older millionaires tend to look to advisors for help with investment and portfolio management.

“Financial advisors should be prepared to deal with Gen X/Y clients who are knowledgeable and who like to be involved in their investments,” Oros said. “These new millionaires are collaborators, looking for a validator to partner with on their investments.”

More than 70% of younger respondents are comfortable with their level of investing knowledge, and what’s more, they’re almost twice as likely to say they enjoy investing as older respondents. They tend to be more aggressive and more likely to add complex investments to their portfolios.

In the last year, the top investments added by younger millionaires were international mutual funds, followed by individual domestic stocks and alternative investments. The survey found they will continue to add domestic stocks in the next year, increasing those holdings by an average 28%.

Domestic stocks were boomers’ top investment both last year and in the coming year, with an average 23% increase expected in those holdings. However, Fidelity found boomers’ second most commonly used investments were CDs, money-market funds and other cash equivalents. Respondents anticipate continuing to add those investments by an average 17%, despite being the No. 1 investment they’re likely to sell.

“Gen X/Y millionaires are hands-on, sophisticated investors who are constantly researching new ways to grow their wealth,” John Sweeney, executive vice president of Retirement and Investment Strategies at Fidelity Investments, said in a statement. “They have taken personal accountability for their financial futures: They’re getting educated, staying involved and seeking guidance from financial professionals and other trusted sources — a good roadmap for all investors.”

The survey found younger millionaires were more likely to feel wealthy than boomers. Fidelity noted that this is likely due to the fact that they were more likely to use their wealth. They own more vacation homes, boats and country club memberships, take more vacations and are more likely to fly first class than boomers, according to the survey. However, in addition to these personal indulgences, they’re also more likely to give their time and money to causes they believe in. Eighty-two percent of younger millionaires volunteer or serve on a charity board, compared with 49% of older millionaires. They also average $54,000 per year in donations.